The reputation of banks has sunk so low in recent weeks, one wonders if it can plummet any further. On June 27 the the Libor rigging scandal erupted when Barclays became the first of many global banks to reach a settlement with the US and UK authorities. In the ensuing days, the bank went into reputational meltdown and, so far, four directors including chief executive Bob Diamond fell on their swords.

Then on July 17 the US Senate’s permanent subcommittee on investigations severely criticized HSBC as a result of its inability to overcome its addiction to the fees it earns from laundering billions of ill-gotten gains for drug barons, organized criminals, terrorists and blacklisted regimes. The author Dean Henderson, claimed the former Hong Kong & Shanghai Banking Corporation has been the world’s drug money laundry ever since it was founded in 1836.

These scandals have caused the general public, politicians, the mainstream media and players in the ‘real economy’ to wake up to some of the horrors that lurk under the bonnet of the financial system. It is beginning to dawn on people that the engine of the sleek-bodied sports car that once delivered an illusion of wealth (or was it actually wealth?), is broken beyond repair; that all that is left is a mass of loose screws and dangerously dysfunctional wiring held together with sticky tape and false promises, and that this particular locomotive device is liable to explode at any time.

The behavior of Bollinger-swilling and routinely mendacious Barclays traders, and traders in interest-rate swaps from scores of other banks including RBS, Deutsche Bank, Citigroup and Lloyds/HBOS, has confirmed what many of us already knew. That despite the crisis, the world’s leading banks and indeed the whole global financial systems remains an ethics-free zone that is dangerously out-of-control.

The scandal has made it clear that many of the shibboleths of investment banking – including all that talk of corporate citizenship, “Chinese walls” and effective compliance – are hollow. The Libor rigging “cesspool” has shown that the dominant culture in investment banking is one of personal and institutional self-enrichment, with overpaid traders and dealmakers lionized and clients are scorned as “muppets” (a phrase mentioned by Goldman Sachs executive Greg Smith in his infamous March 2012 resignation letter).

The scandal of interest rate swaps misselling, which is having such devastating consequences for small and medium-sized enterprises across the UK, has confirmed that the transactional, sales-driven and corrupt investment banking culture has polluted the UK’s retail banking sector as well.

And as a recent briefing note from Fair Pensions (Lessons from LIBOR: Wider implications of the scandal for the Financial Services Bill) makes clear, the problem of unethical behavior, self-serving behavior and ripping off third-party investors is probably endemic across the financial markets.

This was among the depressing messages of the recently published Kay Review, in which writer and academic John Kay identified problems including short-term incentives for fund managers, high-frequency trading, value destructive portfolio churn, layers of obfuscation on costs, other rent-seeking activities … as having a tendency or being actively designed to enrich market participants at end-investors’ expense. Kay, whose report was commissioned by the UK government, is calling change of mindset including a return to long-term thinking in the equity markets and at the top of corporations.

As organizations including Fair Pensions, Finance Watch, and the New Wilberforce Alliance have pointed out, the only way to cure the corrupt and corroded financial work is to re-establish the fundamental principle that financial services exist to serve society and the real economy, not other way around.

Fair Pensions suggests amendments to the UK’s Finance Bill – which will kill off the FSA, and replace it with two new bodies, the Financial Conduct Authority (FCA) and the Prudential Regulation Authority – contribute to such an objective:

Amendment 107 would require the FCA to have regard to the principle that, where consumers put trust in a firm’s discretion and are vulnerable to the exercise of that discretion, the firm must act in consumers’ best interests.

Amendments 106A and 108C would require the FCA to have regard to the principle that firms should act ‘honestly, fairly and professionally’ in accordance with the best interests of their clients.

Amendment 108D would require the FCA to have regard to the principle that those managing other people’s money will ordinarily owe them a fiduciary duty. This amendment is similar in effect to Amendment 107, but narrower in scope.

In a pamphlet entitled The Libor Furore think-tank Demos suggested the Libor scandal signals the end of self-regulation in the City of London.

The regulatory philosophy of the Treasury, Bank of England and FSA which has held sway since the 1980s deregulation – that the secondary markets will organize themselves – needs to change. Caveat emptor alone is not a sufficient organizing philosophy for UK financial markets, and disclosure alone will not bring ideal outcomes.

There are clearly massive and complex issues at play here, including the role of regulators such as the Bank of England in the second phase of Libor rigging (when they either turned a blind eye to the fact, or actively encouraged, banks to ‘lowball’ their interbank borrowing costs in order to avert a meltdown of the financial system). But my overall point is something better change (as The Stranglers’ Hugh Cornwell sang in 1977).

Yes, there is an element of “the genie is out of the bottle” and “this is a case of shutting the stable door long after the horse has bolted”. But simple changes including the three legislative amendments outlined above are among the hinges on which change and radical reform can turn.

If banks and financial institutions continue to squeal about tighter, more prescriptive or more effective regulation, they must be ignored. Their leaders had a three-decade opportunity to show they could be trusted to self-regulate. With Libor rigging and the other financial misdeeds many of which have yet to fully emerge, they’ve finally blown it.